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Magyar Telekom H1 profits jump on staff cuts, freed up provisions

Magyar Telekom’s H1 net profit jumped 57% to Ft 53.7 billion as layoffs began to pay off and a decision by Hungary’s telco regulator allowed the company to free up provisions, Magyar Telekom said in its consolidated IFRS report for the period published Thursday.

Second-quarter net profit came to Ft 31.5 billion, Econews calculated based on Q1 profit of Ft 22.2 billion, well over the Ft 18.3 billion estimate in a poll of analysts by portfolio.hu. First-half revenue inched up 2% to Ft 335.8 billion and operating costs fell 4% to Ft 247.1 billion, pushing operating profit up 24% to Ft 88.7 billion. Payroll costs fell 9% to Ft 48.5 billion as the company cut 14% of its staff. The full-year target for headcount reductions is 15%.

Magyar Telekom said it freed up Ft 8.5 billion in provisions after telco regulator NHH decided the company had sufficiently compensated clients for breaching regulations on fixed line to mobile tariffs. Profits were also helped by lower financial losses, which dropped 16% to Ft 12.5 billion, including a Ft 1.4 billion forex gain, and by property sales.

Magyar Telekom noted it spent Ft 3.4 billion on costs related to an ongoing investigation of questionable contracts at its foreign units. In a breakdown of revenue, Magyar Telekom said fixed line revenue inched up 1% to Ft 155.8 billion as voice revenue fell but internet and data revenue rose. Retail voice revenue inched down 1% to Ft 1.1 billion and wholesale voice revenue fell 25% to Ft 10.9 billion. Internet revenue rose 7% to Ft 30.3 billion and data revenue climbed 7% to Ft 14.5 billion. Mobile revenue increased 2% to Ft 159.9 billion, and systems integration and IT revenue rose 7% to Ft 20.0 billion. Excluding transactions within the group, fixed line revenue dropped 2% to F 147.7 billion and mobile revenue rose 2% to Ft 169.0 billion.

In a regional breakdown, Magyar Telekom said fixed line revenue in Hungary, excluding transactions within the group, fell 3% to Ft 118.4 billion, but operating profit rose 26% to Ft 29.0 billion. Fixed line revenue of Magyar Telekom’s Macedonian unit Maktel was flat at Ft 20.0 billion and EBITDA dropped 19% to Ft 8.1 billion. Fixed line revenue at T-Com CG, Magyar Telekom’s unit in Montenegro, fell 7% to Ft 9.3 billion, but EBITDA rose 25% to Ft 3.2 billion.

Mobile revenue in Hungary increased 1% to Ft 136.9 billion and operating profit climbed 10% to Ft 43.5 billion. Revenue of Pro-M, a unit which operates a mobile communications network for Hungary’s emergency services rose 4% to Ft 3.5 billion. Mobile revenue in Macedonia rose 10% to Ft 21.6 billion and EBITDA was up 12% at Ft 12.0 billion. In Montenegro, mobile revenue rose 4c to Ft 8.0 billion and EBITDA increased 19% to Ft 2.0 billion.

Magyar Telekom had total assets of Ft 1,114.5 billion on June 30, 2008, practically unchanged from twelve months earlier. Net assets fell 2% to Ft 548.0 billion. The company’s debt-to-equity ratio fell slightly to 34.6% from 35.1% during the period. (MTI-Econews)